EXHIBIT 2.2
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
Amendment No.2, dated as of May 5, 2003 (this "Amendment") to the
Agreement and Plan of Merger entered into as of December 23, 2002, and as
amended by that certain Amendment No. 1 to Agreement and Plan of Merger dated as
of February 24, 2003 [collectively, the "Agreement"] by and among MTR Gaming
Group, Inc., a Delaware corporation ("Parent"), Racing Acquisition, Inc., an
Ohio corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"),
and Scioto Downs, Inc., an Ohio corporation (the "Company"). Parent, Merger
Subsidiary and the Company are referred to collectively herein as (the
"Parties").
RECITALS
WHEREAS, upon the expiration of the Due Diligence Period, the Parent
elected, subject to the terms and conditions of the Agreement, to proceed with
the contemplated acquisition of the Company.
WHEREAS, contemporaneously with the execution of the Agreement, the
Parent advanced to the Company the sum of One Million Dollars ($1,000,000.00)
[the "Improvement Amount"] which was intended to provide the Company with
sufficient funds for the payment of accrued indebtedness, general operating
expenses, and capital expenditures prior to the consummation of the acquisition
by the Parent of the Company pursuant to the terms and conditions of the
Agreement (the "Acquisition").
WHEREAS, Owner has continued to experience operating losses and
negative cash flow and, as a result, requires additional funds prior to the
consummation of the Acquisition for the payment of general operating expenses
and capital expenditures.
WHEREAS, Parent has agreed to extend additional amounts to the Company,
in an aggregate principal amount of up to One Million Dollars ($1,000,000.00)
[the "Loan"], pursuant to the terms and conditions set forth in a Loan
Agreement, Promissory Note and Mortgage of even date herewith.
WHEREAS, in consideration for the Loan, and on account of Parent's
extensive experience in the racing, simulcasting, gaming and food service
businesses, the Company has entered into a Management Agreement, of even date
herewith, pursuant to which the Parent will manage the business operations of
the Company, subject to the approval of the Ohio Racing Commission, if required.
WHEREAS, as described herein, the Parties would like to make certain
clarifying and substantive amendments to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements as set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. Incorporation. The recitals set forth above are incorporated herein as
though more fully set forth. And, unless otherwise provided, all defined terms
shall have the meaning ascribed in the Agreement.
2. Substitution of Section 1.08. Section 1.08 of the Agreement is hereby
replaced and superceded by the following:
"The closing of the transactions contemplated by this
Agreement ("Closing") shall take place at such place as shall be agreed
upon by the Parties commencing at 9:00 a.m. local time within fifteen
(15) days after the approval of the Agreement and Plan of Merger and
the merger by the shareholders of the Company provided that all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby and the closing conditions set forth
in Article VI of this agreement (in each case other than conditions
with respect to actions the Parties will take at the closing) have been
satisfied or waived and all required approvals have been received (the
"Closing Date")."
3. Assignability of Contingent Consideration. The right to receive
Contingent Consideration may not be sold, transferred, pledged or assigned other
than by will or the laws of descent and estate. Section 2 of this Amendment is a
clarification of the Agreement and not a substantive change.
4. Substitution of Section 5.12. As a clarification of the Agreement and
not as a substantive change, Section 5.12 of the Agreement is hereby replaced
and superceded by the following:
"Section 5.12. Track Business Contingent Earnout Payment. Track
Business Contingent Earnout Payment shall mean, for each of ten (10)
calendar years beginning on January 1 of the year next following the
year in which the Triggering Event (as defined below) occurs (the
"Contingent Payment Period"), an amount equal to ten percent (10%) of
the amount by which EBITDA (defined below) for the Company for each
calendar year of the Contingent Payment Period exceeds the annual
EBITDA average for the Company for the three (3) fiscal years ending
October 31, 2000, 2001 and 2002 (the "Track Base"), provided, however,
that the Track Business Contingent Earnout Payment shall not be less
than $2,000,000 annually, and provided further that if less than all
the shares of Exchange Stock are delivered to the Disbursing Agent
subject to the election to receive the Contingent Consideration under
Section 1.04(b) of this Agreement, then the Track Business Contingent
Earnout Payment and such $2,000,000 amount shall be reduced by a pro
rated amount, which amount shall equal (x) 100% less (y) the percentage
of the Exchange Shares designated in all Notices of Election to receive
the Contingent Consideration. Not later than ten (10) business days
after EBITDA, and thus the amount of Track Business Contingent Earnout
Payment due for a particular calendar year, has been established,
Parent will deposit the Track Business Contingent Earnout Payment for
that year with the Disbursing Agent in cash or other immediately
available funds in trust for the benefit of the persons who held shares
of Common Stock in the Company as of the Record Date and elected to
receive the Adjusted Merger Consideration. The Disbursement Agent will
disburse the Track Business Contingent Earnout Payment to those persons
who were record owners of the Company's Common Stock as of the Record
Date (each a "Prior Holder") and elected to
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receive the Contingent Consideration as follows: with respect to each
Exchange Share for which the Prior Holder elected the Contingent
Consideration, the Prior Holder will receive a fraction of the Track
Business Contingent Earnout Payment in which the numerator is 1 and the
denominator is the total number of Exchange Shares for which all Prior
Holders elected the Contingent Consideration. Unless and until there
has been a Triggering Event, Parent shall have no obligations and no
person shall have any rights with respect to a Track Business
Contingent Earnout Payment. For purposes of this Agreement, Triggering
Event shall mean (i) state or federal legislation shall have been
enacted that permits the Company to operate enhanced forms of gaming
not permitted by law as of the Effective Date, exclusive of parimutuel
or internet wagering, at Scioto Downs; and (ii) the Company shall have
in fact commenced operating such enhanced forms of gaming at Scioto
Downs. For purposes of the Track Business Contingent Payments described
above, the term "EBITDA" will mean, for any period, the Company's
earnings before interest, taxes, depreciation and amortization as
determined by Parent's independent auditors, whose determination shall
be final, absent manifest error. For purposes of establishing the Track
Base, EBITDA will mean, for any period, the Company's earnings before
interest, taxes, depreciation and amortization as determined by the
Company's independent auditors, whose determination shall be final,
absent manifest error. Notwithstanding anything in this Agreement to
the contrary, no person shall have any right to any portion of a Track
Business Contingent Earnout Payment to the extent prohibited by
applicable law, including but not limited to the Racing Laws. In the
event a governmental authority determines that receipt of a portion of
a Track Business Contingent Earnout Payment is prohibited, absent
receipt of a license issued by such governmental authority, then for a
period of one (1) year from the date of such determination (the
"Licensing Period"), the Disbursement Agent will continue to hold the
Track Business Contingent Earnout Payment in trust. During the
Licensing Period, any Prior Holder who obtains all necessary
governmental approvals to receive a portion of a Track Business
Contingent Earnout Payment (each an "Eligible Prior Holder") shall
receive such Eligible Prior Holder's allocable share of the Track
Business Contingent Earnout Payment (calculated as set forth above)
promptly upon providing to the Disbursing Agent evidence of such
approvals in a form reasonably satisfactory to Parent. Upon the
expiration of the Licensing Period, Parent shall be entitled to require
the Disbursing Agent to deliver to it any funds that had been made
available to the Disbursing Agent and not disbursed to Prior Holders
(including, without limitation, all interest and other income received
by the Disbursing Agent in respect of all such funds). Upon expiration
of the Licensing Period, Parent shall deposit with the Disbursing Agent
in trust for the benefit of any Prior Holder who, during the Licensing
Period shall not have become an Eligible Prior Holder (each an
"Ineligible Prior Holder") in cash or other immediately available funds
an amount equal to $15.00 per share of the Company's Common Stock owned
by such Ineligible Prior Holder as of the Effective Date (the
"Alternative Payment"). Upon disbursement of the Alternative Payment by
the Disbursing Agent, an Ineligible Prior Holder shall have no further
rights pursuant to Section 1.04(b) of this Agreement."
5. Break Up Fee. The Company agrees to pay Parent a fee equal to One
Million Nine Hundred Thousand Dollars ($1,900,000.00) within two business days
of the termination of this Agreement if:
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(a) the Parent terminates the Agreement pursuant to clause (v) of
Section 7.01; or
(b) the Agreement is terminated for any reason at a time in which
Parent was not in material breach of its representations, warranties,
covenants and agreements contained in the Agreement and was entitled to
terminate this Agreement pursuant to clause (iv) or (vi) of Section
7.01; provided that, in the event of the foregoing: (A) prior to the
time of the Special Meeting, a proposal by a third party relating to an
Acquisition Transaction had been publicly proposed or publicly
announced; and (B) on or prior to the 12th month anniversary of the
termination of this Agreement, the Company or any of its subsidiaries
or affiliates enters into an agreement or letter of intent (or resolves
or announces an intention to do so) with respect to an Acquisition
Transaction involving a person, entity or group if such person, entity
or group (or any member of such group, or any affiliate of any of the
foregoing) made a proposal with respect to an Acquisition Transaction
on or after the date hereof and prior to the Special Meeting and such
Acquisition Transaction is consummated.
6. Entire Agreement. Except as expressly amended or modified by the terms
of this Amendment, the Agreement shall remain unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, or have caused this Amendment to be duly executed with legal and
binding effect by their respective authorized officers, in their individual
capacity, as of the date first written above.
SCIOTO DOWNS, INC.
By: _______________________________
Name: Xxxxxx X. Xxxx
Title: President
MTR GAMING GROUP, INC.
By: _______________________________
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
RACING ACQUISITION, INC.
By: _______________________________
Name: Xxxxx X. Xxxxxxxx
Title: President
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